Oversold Greenback Gains

* The dollar rose after finding some support against most major currencies on Friday. Risk aversion increased overnight on Chinese and UK bank worries. Still, the S&P 500 was up a modest 2.81 to 1,068.30 in narrow trading range despite today’s quadruple witching. The yen fell modestly. Japan’s Finance Minister Hirohisa Fujii said exchange rates should reflect economic fundamentals, in an attempt to downplay his earlier support for a strong yen. The euro saw some profit taking following 10-day gains. Sterling fell and broke the 1.64 support on reports Lloyds Banking Group Plc failed to raise enough capital to meet the FSA stress test. The Australian and Canadian dollars were overbought and pressured by lower commodity prices.

* The dollar index rose today after hitting support at 76.00 yesterday. Highly correlated with equity markets, the dollar index dropped the last two weeks as US stock prices rallied. The dollar is extremely oversold and traders are very short the dollar. Still, we would like to see a break of the downtrend before deciding to turn bullish on the dollar; hopefully, it will not be on a stock market decline.



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Financial and Economic News and Comments

US & Canada

* Michigan remained the state with the highest unemployment rate, 15.2% in August, up from 15.0% in July, the Labor Department reported. The states with the next highest jobless rates in August were the following: Nevada, 13.2%; Rhode Island, 12.8%; California and Oregon, 12.2% each; South Carolina, 11.5%; District of Columbia and Kentucky, 11.1% each; North Carolina, Ohio, and Tennessee, 10.8% each; and Florida, 10.7%. New York’s unemployment rate increased to 9.0% in August, the highest since April 1983, from 8.6% in July, while New York City’s rate climbed to 10.3%, the highest since May 1993, from July’s 9.5%. North Dakota continued to have the lowest unemployment rate, 4.3% in August, followed by South Dakota, 4.9% and Nebraska, 5.0%.

* In another sign Canada’s economy is recovering from the recession, Canadian wholesale sales rose a much more-than-expected 2.8% m/m in July, the largest gain since the end of 2006, to C$41.722 billion ($39 billion), after an upwardly revised 0.8% m/m advance in June and an upwardly revised 0.1% m/m decline in May, figures from Statistics Canada showed. July wholesale sales decreased 9.7% y/y. The July month-on-month gain was led by a 14.2% m/m advance in sales in the automotive products sector, a sixth consecutive monthly rise, to C$6.808 billion in July. Despite this rise, sales in the automotive products sector fell 13.5% y/y. Wholesale inventories declined 0.5% m/m to C$56.318 billion in July, a fifth straight monthly fall, lowering the inventory-to-sales ratio to 1.35 from June’s 1.40. July wholesale inventories were down 0.3% y/y.

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Europe

* The eurozone seasonally adjusted current account unexpectedly recorded a ?6.6 billion ($9.7 billion) surplus in July (corresponding to an ?8.8 billion surplus nsa), after a revised ?4.3 billion deficit in June (corresponding to a revised ?0.8 billion surplus nsa), according to figures released by the European Central Bank.

* Germany’s producer prices rose a more-than-expected 0.5% m/m in August, the first rise in 11 months, after a 1.5% m/m decline in July, PPI data from the Federal Statistical Office showed. August PPI fell 6.9% y/y,following July’s record 7.8% y/y drop. The month-on-month August PPI rise was led by a 1.1% m/m increase in energy costs. Excluding energy prices, the PPI advanced 0.3% m/m in August but decreased 3.4% y/y.

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* The UK had a £16.1 billion ($26.3 billion) budget deficit in August, the most for the month since records started in 1993, after registering a £9.9 billion deficit a year earlier, the Office for National Statistics reported. Net debt totaled £804.8 billion in August, equivalent to 57.5% of GDP and the largest debt burden since the mid-1970s. Government revenues in August declined 9.2% y/y. The public sector net cash requirement showed a £10.4 billion deficit in August, the most for the month since records began in 1984.

* UK mortgage approvals rose for a seventh consecutive month in August, rising to 57,000, the highest level this year, from 53,000 in July, figures from the Bank of England’s lending panel showed, signaling the UK housing market is recovering.

Asia-Pacific

* The Japanese leading economic indicators index, a measure of future economic activity, posted a fifth straight monthly gain in July, standing at 82.5, revised downward from a preliminarily reported 83.0, following 80.9 in June, according to final July LEI data from the Cabinet Office. The coincident index, measuring present economic activity, registered a fourth consecutive monthly increase, rising to 89.8, revised upward from a previously reported 89.6, after June’s 88.6.

* Economic conditions in Japan are “showing signs of recovery” and “likely to start improving in the near future,” the Bank of Japan said in the Monthly Report of Recent Economic and Financial Developments September 2009. “Financial conditions, with some severity lingering, are increasingly showing signs of improvement,” the report showed.

FX Strategy Update



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Источник: Hans Nilsson

18.09.2009